Georgy Khachatryan:

Improved legal procedures will attract investments to Armenia

March 5, 2012

PanARMENIAN.Net - Favorable investment climate in a country will definitely attract potential investors. Over the past years, Armenian authorities have made efforts to improve it in terms of business registration, as well as increased transparency of tax and customs administration. Also, actions were undertaken to boost quality of legal procedures aimed to protect business interests. However, much work will needs to be done. See more on this in an interview of senior legal consultant of Ameria Group of Companies Georgy Khachatryan with PanARMENIAN.Net.

Which are the most important landmarks for a foreign investor in Armenia?

If a potential investor considers entering the market of a specific country, in particular, the Armenian market, they first of all look into general administration: how easily a company may be established; whether the company or a representative office of an already operating company is to be established, how easily and quickly relevant permits can be obtained, etc. Further on, the investor considers the tax and customs sphere, how transparent, easy and predictable the administration is, whether privileges apply for foreign investors, and if yes, which exactly. Then they look at the judicial system: the investor pays special attention to how quickly this system operates, because consideration of a case within a short period of time and with least possible costs is important for a business.

The Armenian government has considerably simplified the business registration procedure recently. How do you assess these moves, are there any shortcomings? How attractive it is for investors?

Indeed, introduction of online business registration system has facilitated the investor’s job. In compliance with the recent amendments, the tax service must respond to the register within 20 days after receiving the commitment request. Also, the government delivers regular rulings on liquidation of so called “dormant” companies; amnesty is also being announced.

Tax and customs administration procedures were also simplified; in particular, reports are now submitted online in order to cut the corruption. What else needs to be done to facilitate investors’ business activity in Armenia?

One of the problems the investors face is absence of control prices for customs duties. In 2008, for a short while, the customs service applied basic prices for levying the duties, mostly for customs clearance of vehicles.These prices are no longer applied; now quite subjective approach is used to estimate the market value of a commodity. When an economic entity or a natural person submits an invoice on commodity purchase for specific price in a specific country, a customs officer may not believe them and define the price independently.

However, discussion on this amendment is underway in the government. The authorities realize that Armenia is an importing country and it needs proper regulations to create favorable tax framework for importers.

In addition, a major problem hindering business is the VAT levy practice at the border.

As to introduction of online tax report submittal, the system operates quite well.

In general, the current tax and customs administration in Armenia is quite transparent because it is 98% predictable for the investor.

How protected a foreign investor feels by the Armenian legislation? What can cause their discontent?

As a rule, the court protects the rights and interests of the business. However, we cannot show an impartial judicial system to foreign investors yet because there are some problems.

Legal procedures may take 2-3 years which is unacceptable for business. The Administrative Court which aims to support the business is overloaded; you are lucky if the case can be finalized within one year. Judicial system is not fully developed in Armenia; this refers to the case law of the Appeal Court as well.

We used to have specialized courts before which were established to settle issues promptly, and reduce the workload of some courts. Abolition of specialized courts was a premature move, methods and systems could have been further developed; however, this system is unlikely to be brought back.

What initiatives can be proposed to facilitate legal procedures in Armenia?

We have a cooperation agreement with the Justice Ministry of Armenia; within its framework we provideexpert assessment on the statutory acts which the Ministry develops and which are under discussion and havenot entered the parliament yet. There is a draft bill on amending the civil and procedural code.

We are trying to serve as a filter between problems raised by the business and the objective side of the problem as the government sees it.

Investors will feel comfortable if the situation is predictable, and no political and economic risks arise; this is a global problem.

There is significant progress in terms of information; every ministry publishes all legislative amendments on its website, and applications on different issues can be tracked online.

Which are the fields that now interest investors most in Armenia?

The mining industry, renewable energy, logistics, as well as processing industry are the most interesting fields for investors in Armenia.

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